A network perspective on foreign entry modes of small knowledge-intensive services firms

Battisti, Martina and Scott-Kennel, Joanna and Deakins, David (2021) A network perspective on foreign entry modes of small knowledge-intensive services firms. European Journal of Marketing, 55 (7). pp. 1979-2011. ISSN 0309-0566

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Abstract

Purpose: Integrating network attributes from studies of social networks, business relationships and small to medium-size enterprise (SME) internationalisation, this study adopts a perceptual view of a firm’s focal ‘net’ of relationships to examine foreign market entry mode choice. Our study examines how the interaction between knowledgeintensive service (KIS) firm’s focal network ties, embeddedness and position is related to entry mode choice and subsequently the firm’s perceived insidership status within its focal net. Methodology: This research is based on qualitative interviews with 25 small to medium-sized KIS firms engaged in direct exporting or foreign direct investment (FDI). Our study derives an empirically grounded framework of four distinct network patterns of these KIS firms through an iterative process of triangulation between cases and theory. Findings: The four network patterns illustrate the complex interaction between network attributes and entry mode choice by KIS firms. Our findings suggest formal ties and centrality in closed network relationships provide the ‘central controller’ firm over their entry mode choice. Resource-intensive FDI by ‘opportunistic investors’ proved essential to securing centrality through formal, institutional ties. Less optimal patterns lacking institutional ties and centrality, however, precluded choice of FDI by ‘specialised exporters’ and ‘client followers’. The study finds that entry modes are less likely to be influenced by the firm’s embeddedness in open or closed network relationships, but rather by the desire to achieve a more central network position and legitimacy through more formal, less imitable ties. Research implications: Our findings demonstrate the importance of network structure, a position of centrality, and strength of professional and institutional ties to small KIS firm internationalisation. By adopting a more finely grained examination of the interaction between key attributes of the firm’s focal net, our study provides a valuable first step in conceptualising the complexities associated with networking and adoption of export/investment internationalisation modes. Practical implications: There are a number of implications for the strategic and operational facets of smaller KIS firm internationalisation. To avoid excessive network liability for resource-deficient SMEs, practitioners should consider network positioning as a strategic activity, with the costs associated with building and maintaining networks offset against economic and resource-related returns. Originality/value: We contribute to a better understanding of entry mode choices of KIS by taking a network perspective that accounts for the combined effects of different network attributes. The four network patterns identified extend current theoretical knowledge on the role of networks for entry mode choices of small KIS by highlighting that entry mode choices reflect the particular firm’s focal net and its attempt to achieve insidership status through highcentrality and formal ties.